DCC, the distribution group, has agreed to pay up to €38.1 million (£30 million) for Distrilogie, a value-added distributor of computer storage products based in Paris. The move is in line with DCC's plans to expand its IT distribution business into continental Europe. Distrilogie also has offices in Madrid, Lisbon and Milan.

DCC has acquired a 55 per cent shareholding in the French company from four of its senior executives for €9.3 million cash and will have a majority of directors on the board. There is a put and call option by DCC, or the executives, on the remaining equity, on a phased basis, over the three years ending March 31st, 2003. This will be based on a multiple of between 8.5 and 9.5 times Distrilogie's earnings after tax but will not exceed €28.8 million.

Mr Tommy Breen, managing director, DCC SerCom, said the deal should be earnings enhancing in the year to March 31st 2001. Merrion Stockbrokers, in a review of the deal, said it should ensure that DCC SerCom would continue to grow at 35 per cent per annum. It forecasts the deal will result in a 1.6 cents increase in earnings per share in the first full year. Also, Merrion reckons the French company's operating profit will growth by 30 per cent in 2001 and by 20 per cent in 2002. The maximum earn-out is based on a 50 per cent rise in earnings per annum.

DCC said Distrilogie has had a record of strong sales and profit growth. Its management accounts for the year to December 31st 1999 show sales growth of 83 per cent to €67 million and an operating profit growth of 101 per cent to €3.6 million. Its net assets amounted to €4.8 million with net debt of $7.2 million. DCC's chief executive and founder, Mr Jim Flavin, said DCC SerCom's IT distribution businesses, Micro P and Gem in Britain and Sharptext in Ireland, are continuing to achieve fast growth in revenue and profits. The latest acquisition "should further enhance the growth prospects of this division and is in line with our stated objective of expanding our IT distribution business into continental Europe".

He said Distrilogie's focus on the fast-growing computer storage market offered significant opportunities for future growth, especially in the Internet infrastructure market. "We plan to grow Distrilogie aggressively as a pan-European business and to exploit geographic and product synergies with Micro P, and Sharptext."

DCC has nominated the drivers for growth as the Internet, e-commerce, e-mail and the continual drive to automate business processes through the deployment of planning systems, imaging systems and data warehousing. Distrilogie has distribution agreements with leading brands in the storage systems market including IBM, Sun, Exabyte, Veritas, Seagate, StorageTex, Legato and Tandberg. The French company employs 68 people.

DCC SerCom recorded an operating profit of €15 million on sales of $355 million in 1998/9. This represented 24 per cent of DCC's operating profit.